Ups and Downs on Vacation

"With spring begun, I've
searched for bullish and bearish ideas among companies that specialize in
entertainment, distraction, and that glorious idea of vacation," notes
Jocelynn Drake. Here, she looks at a potential winner among casinos and a
loser among cruise lines.

"When it comes to locating a bullish bet,
I didn't have to dig too deep to find Wynn Resorts (WYNN NASDAQ),
which opened Wynn Las Vegas in 2005— a
$2.4 billion resort and casino, on the site of the former Desert Inn on the Las
Vegas Strip. The resort boasts a 2,700-room hotel, a casino with 2,000 slots and
135 table games, 18 restaurants, an 18-hole golf course, an art gallery, two
wedding chapels, and a Ferrari and Maserati dealership. Furthermore, WYNN is
developing an adjacent casino, Encore (opening in 2008), and a casino in Macau.

"Technically speaking, the shares have
staged a solid rally since bouncing off support in the 42 area. The equity has
tacked on more than 80% as it has climbed on the support of its ascending
ten-week moving average. What's more, this uptrend has carried the equity through
former resistance at the 76 level.

"Meanwhile, traders are determined to call
a top to the stock's ascent. Options players have piled into the equity's puts,
pushing its Schaeffer's put/call open interest ratio (SOIR) up to 1.54. This
reading is higher than 94% of all those taken during the past 52 weeks. In other
words, speculators have been more bearishly aligned toward the security only 6%
of the time.

"Short interest has also swelled to hefty proportions.
While the number of WYNN shares sold short dropped by 8.7% in March, the 8.6
million shorted shares still account for 17.9% of the security's float. What's
more, it would take roughly five days to buy back these bearish bets at the
stock's average daily trading volume. A continued unwinding of these positions
could fuel a significant rally in WYNN. Overall, this combination of technical
strength and overwhelming pessimistic sentiment has earned WYNN a Schaeffer's
Equity Scorecard ranking of 8.0 out of 10.

"Near the bottom of my list of stocks I
find Carnival (CCL NYSE)
with an Equity Scorecard ranking of just 0.5. Let's take a closer look at this
potential bearish opportunity. CCL is the world's number-one cruise operator,
with 12 cruise lines and almost 80 ships carrying about 6.8 million passengers.
The firm operates in North America primarily through its Princess Cruise Line,
Holland America, and Seabourn luxury cruise brands, as well as its flagship
Carnival Cruise Lines unit. Brands such as AIDA, P&O Cruises, and Costa
Cruises offer services to passengers in Europe while the Cunard Line operates
the ocean liners Queen Mary 2 and the QE 2.

"From a technical perspective, it hasn't
been pretty for CCL. The stock has underperformed the S&P 500 on a weekly
basis since January 2005. Moving in for a closer look, the equity has slid lower
from its January 13, 2006 peak of 56.14, shedding more than 16% under pressure
from its 10-day and 20-day moving averages. What's more, the security has once
again breached support at its 20-month trendline. The only concern I have with
the stock from a technical point of view is the 46 level. This region buoyed the
shares in April and October.

"Turning to the stock's sentiment
backdrop, investors are extremely optimistic about the firm. Options players
have exhibited a definite preference for bullish calls over puts. The equity's
SOIR rests at 0.63 and is just one percent shy of hitting a new annual low.
What's more, short sellers have grown complacent. In March, short interest
dropped 16% to 10.9 million shares, or just 2% of the stock's float. With a
short-interest ratio of 3.3 days to cover, the equity has little in the way of
potential short-covering support.

"Even Wall Street has become enamored of the company.
According to Zacks, 11 of the 14 analysts following CCL rate
it a ‘buy’ or better. This configuration leaves ample room for potential
downgrades. While CCL looks like a solid bearish bet, traders may want to wait
to see if the stock will break through support at 46 before jumping
in."